Adair Turner, one of the architects of pension reform, says George Osborne's
changes went "too far"

Radical changes to Britain’s pensions system announced in the Budget went “too far” and risk leaving millions of pensioners close to poverty in later life, according to one of the architects of pension reform.

Lord Turner, the former head of the Pensions Commission and the Financial Services Authority, said George Osborne’s decision to hand retirees the freedom to withdraw their entire pension pot in cash from next year meant many could squander their savings.

“There’s a danger that people don’t realise how low the state pension is,” he told The Telegraph. “Fundamentally, when the state single pension comes in, it will keep people out of absolute poverty, but they need to know that’s all it does.”

People over 55 who want to access their savings currently have to buy an annuity, which turns their pension pot into an income until death. While Lord Turner said buying an annuity might not provide “good value” at 65 because increased life expectancy would drive down monthly payments, he said it would be “sensible for most people to put at least some of [their pension pot] into an annuity, maybe at 70 or 75.”

Research by the Institute for Fiscal Studies has shown that men between 50 and 60 years old underestimate their life expectancy by around two years on average, while women underestimate it by around four years.

"It is interesting that having, on the accumulation side, moved away from pure voluntarism, to nudge and encouragement, on the decumulation side, we've gone from pure compulsion, to complete voluntarism, and it's not clear that is the best way to proceed," said Lord Turner.

He also raised concerns that pensioners might use their pots to invest in buy-to-let properties, which could stoke future house price bubbles.

"I fear it could set a dangerous precedent ... because it could add yet another twist to this endless British cycle of piling money into real estate which would make it even more difficult for first time buyers to enter the market."

The Government plans to raise the state pension age to 68 by the mid-2030s. Lord Turner has previously said the pension age should rise to 70 by 2040. Asked if people might eventually have to work to 100, he said: “They’re going to have to, aren’t they.

"Suppose it is the case that by the time somebody is born in 2030 their life expectancy is 120 years - that to me is not impossible, given the great medical breakthroughs. You cannot possibly say that person is going to leave the workforce ages 70 and spend 50 years in retirement."